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OVERNIGHT DEVELOPMENTS
The Stoxx Europe 600 was up 0.5% in recent trading, led in part by a rise in bank shares. Commerzbank was one catalyst, after it reported higher-than-expected profit and revenue in the first quarter.
Futures pointed to a small opening rise for the S&P 500.
Earlier, Hong Kong’s Hang Seng Index rose 1.3%, supported by a recovery in shares of gambling companies and as Chinese markets pared losses that had been stoked by concerns about a clampdown in speculative trading.
BREAKFAST BRIEFING
One thing that was missing from the Sohn Investment Conference on Monday: big-time bears.
None of the famous money managers that brought their investment ideas to the annual confab portrayed a particularly dark global outlook or warned of an imminent market crash.
Contrast that to a year ago, when billionaire trader Stanley Druckenmiller said, “The bull market is exhausting itself” and suggested selling equities and buying gold, a traditional defensive stand against a market decline.
This year, Mr. Druckenmiller introduced the day’s first speaker, Kevin Warsh, a visiting economics fellow at Stanford University’s Hoover Institution, and joked that last year’s dire call was why he wasn’t a keynote speaker this year.
The conference’s tonal shift is representative of the broader mood in the markets: Many stock investors may be bearish, with economic growth sluggish and pro-business legislation stalled in Washington, but few are willing to call a top, or bet on a big decline. That was especially true on a day in which the CBOE Volatility index, or VIX, a measure of expected stock swings, hit its lowest level in a generation.
Many presenters stuck to specific trade ideas unrelated to the broader economic outlook. Social Capital’s Chamath Palihapitiya touted Tesla convertible bonds. David Einhorn, the president of Greenlight Capital, said he was shorting Core Laboratories, a company that provides analysis for the petroleum industry drilling. And Cliff Robbins of Blue Harbour said he thinks Investors Bancorp is worth about 30% more than its current price.
To be sure, some advised betting against the current market. Jeffrey Gundlach of DoubleLine Capital suggested a leveraged bet using ETFs on rising emerging market equities and a falling S&P 500. But that was largely based on relative value, he said, noting that valuations for U.S. stocks were expensive while emerging market multiples were cheap.
Eight years into the current bull market, investor fears seemed to be at bay — or at least in hiding.
Incidentally, it was a non-investor who took the most bearish tone. Mr. Warsh, a former official at the Federal Reserve, warned in his talk about investor complacency, saying the low VIX readings should be worrisome.
“I would not take comfort,” he said. “I would take fear.”
DAILY FACTOID
On this day 1894, Benjamin Graham is born in London, England.
MONEYBEAT PODCAST
Now that the GOP healthcare bill has passed the House, Heard on the Street’s Charley Grant and Mark Doms, senior economist at Nomura, talk what investors should be looking out for next. Then, Erik Holm breaks down the top takeaways from the 2017 Berkshire Hathaway Annual Shareholders Meeting.
Subscribe to the MoneyBeat podcast at wsj.com or on iTunes.
KEY EVENTS
10:00 a.m.: Job Openings and Labor Turnover Survey for March [Prior:5.743 million]
February’s Jolts report showed little change in the rate at which employees left positions or employers filled new ones. The data underscored how difficult it is to enliven an economy as large as that of the U.S.
10:00 a.m.: Wholesale Trade Fro March [Prior: 0.4%; Consensus: 0.2%]
Wholesale inventories in the U.S. rose 0.4% in February, rebounding from a decline at the start of 2017. Inventories are expected to rise 0.2%t in March despite a 0.1% decline in advance data.
STOCKS TO WATCH
Companies discussed after Monday’s closing bell at the Sohn Investment Conference could see some movement Tuesday. Frontier Communications is down 5.2% in premarket trading after Josh Resnick, founder and managing partner at Jericho Capital Asset Management, pitched his short thesis on the stock. Larry Robbins of Glenview Capital pitched DXC Technology Corp., up 1.4% before the bell, as a potential long. He was also bullish on FMC and Quintiles IMS Holdings.
Shares of Hertz were down 17% premarket after the rental-car company reported a loss of $223 million for the first quarter and missed expectations.
Shares of Valeant are up 11% in premarket trading, after the drug maker beat first-quarter profit expectations, although revenue came up shy.
Shares of Marriott gained 3.9% premarket after the hotel operator’s quarterly earnings released late Monday topped Wall Street estimates.
Allergan was up 1% premarket after the drug company reported earnings that topped expectations tops earnings estimates on strength of Botox, eye care products
TODAY’S VIDEO
Former Acting Attorney General Sally Yates told Congress on Monday she warned a White House official that former National Security Adviser Mike Flynn had misled Vice President Pence about his conversations with a Russian diplomat.
NUMBER OF THE DAY
9.77
The level the VIX, which typically moves opposite from stocks, fell to on Monday, marking its lowest close since Dec. 27, 1993.
MUST READS
Yates Warned White House Flynn at Risk of Russia Blackmail: Former acting Attorney General Sally Yates told Congress she had warned a top White House official that then-national security adviser Mike Flynn had misled the vice president and others about his conversations with a top Russian diplomat, and that it had put him at risk of blackmail.
Investor Anxiety Drops to New Low: Investors are as sanguine about the stock market as they have been in almost a quarter of a century, according to one indicator, despite months of global political turmoil, showing comfort in strong corporate earnings.
Goldman Shakes Up Leadership at Its Investment Bank: Goldman Sachs is making the biggest changes in a decade to the leaders of its investment-banking division, the firm’s second-largest unit by revenue.
Why a Cable Deal is Bad for the Phone Industry: A wireless deal between Comcast and Charter will help them lower their costs, posing a greater threat to Verizon and AT&T.
It’s Time to Buy European Stocks—Sorta, Kinda, Maybe: Emmanuel Macron’s victory is good news for investors, Europe is recovering perfectly well and investors ought to have some exposure to the region. Like Mr. Macron’s voters, it is hard to be any more enthusiastic.
Big Investor Pulls Support for Bombardier Chairman: Quebec’s big pension fund is opposing the re-election of Bombardier Inc. Executive Chairman Pierre Beaudoin, signaling a new level of investor activism at the ailing aerospace company.
Yale to Build Tool Offering Real-Time Lessons on Financial Crises: Yale University will launch an online platform to provide real-time support to policy makers dealing with financial crises, with the help of a $10 million gift from philanthropists Bill Gates, Jeff Bezos, Michael Bloomberg and Peter G. Peterson.
Banks Want Mnuchin to Intervene in Fight Over New Loan Rule: Banks are trying to enlist the Trump administration to fight a new accounting rule requiring them to book losses on soured loans more quickly, potentially setting the stage for a clash between the Treasury Department and the SEC.
Disney Earnings — Why the News Won’t Be All Bad at ESPN: Disney’s stock has underperformed over the past two years thanks to ESPN; why the stock could be due for a rebound.
CHART OF THE DAY
May 09, 2017 at 05:45PM
from Ben Eisen
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